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Contractors Uncertain On Debt Deal

Photo: Sergej Khackimullin

The debt ceiling increase President Barack Obama signed into law Tuesday is certain to cut $350 billion from the defense budget.

However, according to Government Executive, federal contractors are left with uncertainty over how to plan for the long term.

The cuts come at a time when the defense contracting industry was already bracing for layoffs. Lockheed Martin announced a voluntary layoff program for 6,500 employees two weeks ago.

The spending caps, agreed to as part of the debt ceiling hike, are evenly distributed between security and nonsecurity spending for the next two years. After that, there likely will be another battle over how to allocate funds in security and nonsecurity categories.

“The difference in this year’s deal is that they’ve put a spending plan in place before they have a strategy on needs assessment,” said Alan Chvotkin, executive vice president and counsel for the Professional Services Council, a contractors group. “The spending is driving the strategy rather than strategy driving the spending.”

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